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Common Sense?

Quoted in Monday’s NYTimes:

“Arguing that those working for the benefit of the neediest people in our society should make millions and multimillions like corporate leaders defies common sense.”

–  Ken Berger, President of Charity Navigator


There may be some foundation to Berger’s argument – though I think it represents mainly a kneejerk reaction to perceived misuse of donor funds – but calling it common sense? That seems a little strong.

It seems to me that, to the contrary, there are some very viable arguments for why large and effective* non-profit leaders should get corporate-style compensation. One of these arguments could be moral; these leaders deserve it based on the social benefit their organization provides. Another could be that their work is often quite difficult, and high salaries are adequate rewards for such a challenging profession.

The most common argument, however, is one of talent attraction, and it’s such a classic argument because it’s by and large true. The most talented, intelligent, and ambitious people are the ones we want running our nonprofits. They are also the people with the most opportunities available to them, both public sector and private. Some of them might be driven to charity work by their moral compass; most are driven by their financial compass. To have this top-talent at the helm of our most impactful and most complex nonprofits is, clearly, going to cost money.

Of course, it’s no surprise to see the president of a charity watchdog arguing against this idea. It’s a lot easier for him and his organization to keep count of tangibles (like bed nets, medicine, school supplies, etc.) than it is to make a quantified measurement of the impact of a good leader. His whole organization is based off condemning nonprofits on the very basis of spending too much on salaries and other “overhead” instead of the poor.

But in the non-profit world, just as in the corporate, it’s not a zero-sum relationship. Every dollar spent on the leader’s salary is not a dollar less being spent on the poor; rather, it’s an investment. It’s an investment that’s admittedly hard to measure (though looking at the fact many directors oversee the solicitation of donations worth many hundreds of times their own salary is one positive and indicative count). But the impact of a good leader – one that organizes efficiently, spends effectively, innovates, and more – is well worth a million dollars to an organization with hundreds of millions to spend. The – relative to budget – small savings from a cheaper leader are not remotely worth the decrease in leadership quality. These are people that have an enormous impact on the effectiveness of the organization.

Clearly, there’s cognitive dissonance up the wazoo when people working for the benefit of the poor are well-paid. But this cognitive dissonance is a logical fallacy. We seek the most qualified to lead our businesses, we try to do the same for our government. Why shouldn’t aid organizations be given the same status?

If we want non-profits to be effective, innovative, and efficient, they need first-rate leaders. Such leaders are expensive. These are simple facts.

 To deny them, in my opinion, defies common sense.

* The world of large and effective non-profits (think Red Cross, MSF, etc.) is quite different than the prolific small and corrupt non profits that amount to little more than ways to steal money from donors. This post does not concern that type of institution.

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